(Thomas Jefferson)
Welcome to The Golden Sense! I want to take a second to thank all readers. I have gotten some great responses from all of you and i want to thank everyone for your support. The writings will continue and in the world of finance, the markets, economics and psychology there are always more questions.
"Have you ever heard of the golden rule? Whoever owns the gold makes the rules."
Being young, starting out in life, or battling your way through mid-life can be very difficult when trying to accumulate financial security. 401k's, IRA's, CD's, money markets, brokerage accounts, forex accounts, stock options, mutual funds, pensions, etc. The list of financial options is long and complicated and that's why people often seek financial advisers or shun the process all together. Unfortunately it is one of those "complicated necessities" for your own personal security and your families future financial security.
Who wants to even acknowledge all this stuff anyway? Seriously. I just want a new motorcycle or she just wants that new dress from Anthro. Whatever! Lets just live in "the now". Sorry, no can do. When dealing with money, you deal with the future.
Let me propose a question to you.
If you could leave something to your great great great grandchildren in the year 2140, that would grant them personal and financial freedom, what would that be?
Wait, wait, wait Todd. Why are you asking these silly questions? How does that relate to me?
It relates to us by answering the question: what can we buy that will retain its VALUE?
You would want to leave them something durable, timeless in value and has a long history . You would want to leave something convenient, transportable, non destructible and outside any Governments grasp.
How about a couple million crisp U.S. dollar bills? Hmmm? The Federal Reserve states that their ideal would be for inflation (increase in money supply) to be at 2% annually. OK, so you have $2,000,000. In 25 years the value of that money would be cut in half. Our so-called "dollar" became a non-intrinsic fiat currency in 1971, under the watch of a frightened President Nixon. Historically, fiat currencies tend to last around 40 years (Richard Russell Dow Theory). By the way, the U.S. dollar as a fiat currency is in its 39th year. Leaving a load of cash sitting around for the next 130 years doesn't seem like a great idea.
Would you leave them with your 401k portfolio loaded with stocks and bonds? The Dow Jones industrial average was created in the late 1800's. (http://www.fool.com/DDow/HistoryOfTheDow5.htm). Less than 150 years ago. Consider this - of the original stocks in the D-J Industrial Average, only one - General Electric - is still in the Dow Average. Companies can go broke. Same with bond issuers. Both are denominated in fiat currency (government created money). Markets go up and down. The value of the portfolio can depend on the knowledge of who is managing it. Who knows what your portfolio would be worth in the year 2140? In my mind, that isn't the best bet either.
How about some real estate? My problem with real estate is that it is fixed, non transportable and sometimes illiquid. Homes deteriorate. The cities and landscapes of nations change drastically over a 100 years. Real estate is only as good as what is around it. Nations fall apart, wars happen, property rights differ in many countries. I know it sounds pessimistic. But perhaps it is realistic considering what happened in the 20th century and the centuries before. Real Estate is not a guaranteed store of value. There is potential for wide change.
How about a Picasso or great piece of art? That's not a bad shout, however, art can be easily damaged or destroyed. It is also not divisible in its worth. Art's value is in the eye of the beholder. I love art, but maybe that's still not the best thing we can think of.
Diamonds anyone? Every kiss begins with Kay? Hardly, Kay Jewelers is a bit on the low quality end. I'm talking high quality diamonds. Tiffany? Cartier? Those are good sources. High quality diamonds are a great store of wealth. The rich of the world are currently snapping up high quality diamonds in an effort to secure their wealth. Unfortunately, high quality diamonds are hard to get a hold of. I think diamonds are a great suggestion. However, I am thinking of another item that has been dubbed the "ultimate currency".
What is it?
The answer is gold.
Gold is timeless money and it has a number of unique characteristics. It retains its value compared to all other item. Golds value does not change. You'll never go broke owning gold. The value of paper money is what changes in relation to gold. If the price of gold goes up, that just means your non-backed paper money is losing its value.
Gold cannot "disappear" or be used up in manufacturing. Thus, the gold coin that you have in your hand may have been part of Cleopatra's earrings centuries ago. Almost all the gold that has ever been discovered is still available in one form or another.
Most importantly, gold is not the liability of any sovereign nation, nor does it require governmental law to make it money. Gold is traded around the world 24/7.
Fact: Gold is money. 5000 years of history underlines that statement.
Gold requires capital, talent, risk, sweat and courage to recover or to accumulate.
Even Marilyn Monroe echoed these remarks about gold in her 1954 movie River of No Return.
Marilyn was no dummy. I wish i could have met her.
Buyers and holders of gold hope that the dollar price of gold will rise to $2,000, $4,000, even $10,000. But that is not the primary reason for holding or buying gold. When you own gold, you own the one item that has held its value over the centuries. Where are all the other fiat currencies that have been created in the past ("Greenbacks, Continentals)??
Corporations fail, nations fall apart, empires collapse, homes deteriorate, millionaires become destitute, but gold has ALWAYS represented wealth. Throughout history, the nation or the person who owns a relatively large quantity of gold is wealthy. Period. You don't buy gold as a speculation, you buy gold to be wealthy and immune from the central banks and greedy politicians (Richard Russell).
OK Todd, that's great. But how and the heck can I buy gold? It's getting more expensive by the day and plus i would not have the first clue on where to buy it.
That is a common concern. You will have to do your best to save up a chunk of change in order to buy an ounce of gold currently going for $1400.
Once you have the cash, it is pretty easy to buy gold. If you want the physical coins in your possession then you can order them through http://www.monex.com/ . I'm pretty sure that most cities have a jewelery or coin store that sell these precious babies. Beware of the mark ups on the coins. South African Krugerrands, Canadian Maple Leafs, or Gold Eagles are some high quality well recognized coins.
If you have a brokerage account, you can look into buying GLD.
There are other options such as Bullion Vault or the Perth Mint in Australia.
All of that is for you to decide.
People buy things for a reason. People will buy stocks, invest in CD's or bond's in hope of increasing their wealth. At the same time there is risk of losing their wealth with those investments.
The point?
Buy gold to preserve and accumulate your wealth. Perhaps to give your great great great grandchildren? You know...whatever you want to do. The rest is fun and games.
Sincerely,
T. Norman
Random Comments:
Just got a Nano Ipod as a gift from Rebecca. It's great. It is crazy how much a small device can do. Apple has some great products. What the heck is Microsoft doing these days? Their products for the last decade have been terrible.
The Washington-based IMF (International Monetary Fund) recently completed its promised sale of gold. It was rumored that the IMF would have to sell its gold on the open market. Not so. The fact is that central banks eagerly gobbled up the IMF's gold. According to The Financial Times, the IMF sold its gold directly to the central banks of
Why are these central banks trading paper for gold? After all, it's the central banks that are creating the fiat paper. Why are they swapping their own beloved products for gold?
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Recently, billionaire George Soros publicly denounced gold as the "ultimate asset bubble." Ironically, an SEC filing shows that the biggest holding of the Soros Fund as of September 30, 2010 was gold. You see, even well-known billionaires can be liars and manipulators (Soros was hoping to knock the price of gold down so he could buy more on the cheap). (Richard Russell Dow theory Letters)
Anyways, the weather in SB is getting crazy again. It's hot and i like it. I'm gonna enjoy it while i can because next week it might be freezing again? who knows?
Oh, and a quick shout out to my S. Korean friend Ji. He's due back in the States in couple months! Great news all around.
The blog above heavily referenced Richard Russell's Dow Theory Letters. I recommend all readers to get a subscription to his daily sites. The amount of knowledge one can gain from his sites is incredible.
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